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Note
2: Expenses
In fiscal 2006 (which runs
July 1, 2005
through
June 30, 2006
), the town of
Hopkinton
plans to spend $52.2 million on its operations.
Based upon the 2003 census that is about
$3500, or $10 per day, for each resident in town.
This budget is $3.1 million, or 6.3%,
higher than fiscal 2005 and $4.3 million, or 9%,
more than fiscal 2004.
So what do we get for that $10 every day?
The answer is, mostly three things:
schools, debt service and employee benefits.
Those items alone consume over 75% of the
budget. Rounding
off the numbers to make the math easy, from each
$10 bill, the schools take $5.50, debt service
$1.30 and town wide employee benefits $1.00.
All the other town services – police,
fire, DPW, library, and other government
departments - together split $1.60.
Those of us with town water and sewer pay
$.60 for the privilege.
The purpose of this exercise is not to draw
foolish comparisons to what you spend at Starbucks
or to argue about relative values.
What it does make apparent, however, is
that the budget is largely driven by personnel.
More than 80% of town spending goes to
employee pay and benefits and that share is
increasing – pay and benefits accounts for
nearly 90% of the budget growth from 2005 to 2006.
New trucks, buildings, or any other capital
expenses are a glass of water out of
Lake
Whitehall
in comparison to the costs of the people to go
inside them.
Of the $3.1 million increase for 2006, over
$2.2 million is personnel costs, composed largely
of salary raises and increased benefit costs, and
another $500,000 is due to state-mandated or other
required new hires for the schools.
Less than $400,000 is for new debt service,
road maintenance and everything else.
The simple reason that the budget continues
to grow well in excess of the rate of inflation is
that employees, and in particular employee
benefits, are becoming dramatically more
expensive. This
is what has led to the need for overrides and
significant use of stabilization funds in the past
three years to balance the budget.
Since the school system contains the largest
number of employees, it naturally represents most
of the cost. But
the issue cuts across the entire town.
All town employees are subject to a regular
set of negotiated cost of living adjustments in
the range of 2.5% in fiscal 2006.
In addition, employees receive additional
pay raises based primarily upon years of service
and professional certification which are called,
“steps and lanes”. The
size of each raise varies with seniority and
duties; however the structure is such that they
are especially large in the early years of
employment. The
school system is particularly hard hit by these
increases because our recent growth has created a
high proportion of newer teachers moving quickly
up the pay scale.
The result is that employee costs for 2006
rose at over 4.5% per year, more than 2% faster
than the rate of inflation.
That number is unusually high due to the
fact that some of the pay raises due for 2005
weren’t actually paid until 2006, but the two
year average is still well over 3%.
Add in all the other costs and the full
budget is up almost 9% in two years – and that
was before interest rates started rising and
energy costs doubled.
Perhaps the only consoling thought is to
remind ourselves that no trend continues forever
– and there are some reasons to hope that this
stunning level of growth will not continue
indefinitely.
As the workforce increases in seniority,
the dramatic rate of pay increases should
moderate. The
(relatively) slower growth phase that the town has
entered should reduce the need to hire new
teachers and school staff compared to recent
rates, although that could change radically
depending on what happens with the Weston
Nurseries land.
The town is seeking ways to slow the rise
of insurance and other benefits costs.
Unfortunately, this does not imply that the
pressures on the budget will go away.
As we will discuss next time, the town’s
revenue is increasing by a maximum of 3-3.5% each
year. Even
with moderation in the growth of expenses, that
kind of revenue growth barely covers just the
personnel cost increases.
For the foreseeable future there will be
little, if anything, left over to fund increased
services for schools or the senior center,
additional debt for new buildings, unpredictable
items like higher energy costs, other irregular
expenses (e.g., police cruisers, fire trucks),
road maintenance, or to replenish the
Stabilization Fund.
Paying for these will require something
else - regular, substantial tax overrides;
significant operational expense cuts that are
likely to lead to fewer services; or a combination
of the two. To
help understand why, we will examine the sources
of the town’s revenue in our next note.
Next:
Revenues
This
is the second installment in a series of articles
on the town’s finances prepared by the Hopkinton
Appropriations Committee.
To receive future notes in this series,
please send an e-mail to: appropriations@hopkinton.org
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